HIGHFIELD RESOURCES LIMITED — AGM Information 2016

Nov 17, 2016

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Highfield Resources Ltd Managing Director’s Presentation to the Annual General Meeting

18 November 2016 Corporate Presentation ASX Code: HFR

COMPETENT PERSON STATEMENT – RESERVES, RESOURCES

The information in this release that relates to Ore Reserves, Mineral Resources, Exploration Results and Exploration Targets is based on information prepared by Mr. José Antonio Zuazo Osinaga, Technical Director of CRN, S.A.; Mr. Jesús Fernández Carrasco. Managing Director of CRN, S.A. and Mr Manuel Jesus Gonzalez Roldan, Geologist of CRN, S.A. Mr. José Antonio Zuazo and Mr. Jesús Fernández, are licensed professional geologists in Spain, and are registered members of the European Federation of Geologists, an accredited organisation to which the Competent Person (CP) under JORC Code Reporting Standards must belong in order to report Exploration Results, Mineral Resources, Ore Reserves or Exploration Targets through the ASX. Mr. José Antonio Zuazo-Osinaga has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a CP as defined in the 2012 Edition of the JORC Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.

Mr. José Antonio Zuazo and Mr. Jesús Fernández consent to the inclusion in the release of the matters based on their information in the form and context in which it appears. FORWARD LOOKING STATEMENTS

This presentation includes certain ‘forward looking statements’. All statements, other than statements of historical fact, are forward looking statements that involve various risks and uncertainties. There can be no assurances that such statements will prove accurate, and actual results and future events could differ materially from those anticipated in such statements.

Such information contained herein represents management’s best judgment as of the date hereof based on information currently available. The company does not assume any obligation to update any forward looking statement.

Highfield Resources Limited

CONTENTS

1. Corporate Summary

2. Board and Senior Management

3. The Muga Potash Mine

4. Timeline to Production and Key Milestones

5. Capital and Operating Costs

6.[Stakeholder Engagement ]

1. Permitting

2. Upside Potential

3. Value Proposition

4. Summary

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1. Corporate Summary

	Fully Diluted Equity
Ordinary Shares on Issue		320.0m
Options		47.8m
Fully Diluted		367.8m
Undiluted Market Cap at A$1.23 (16 November 2016)		A$394m
Cash as at 30 September	2016	~A$83m
Enterprise Value		A$311m / US$236m1
Average Daily Volume (6 months)		~385,000
	Shareholders (Fully Diluted)
Spanish in-country management		17%
Australian based management		6%
EMR Capital		26%
Other Shareholders		51%
	Total	100%

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Broker	Recommendation	12-month Price Target
Bell Potter	BUY	A$1.75
Blue Ocean	BUY	A$3.00
Canaccord Genuity	BUY	A$2.30
Foster Stockbroking	BUY	A$2.30
RBC Capital Markets	BUY	A$2.00
Taylor Collison	BUY	A$3.01
	AVERAGE	A$2.39

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1) USD:AUD exchange rate 0.76:1.00

2. Board and Senior Management

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Board and Senior Management experienced in construction and operations

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Board of Directors
Derek Carter
Non-Executive Chairman Pauline Carr Jim Dietz
Owen Hegarty Richard Crookes
Independent Independent
Non-Executive Director Non-Executive Director
Non-Executive Director Non-Executive Director
Anthony Hall
Advisor
Peter Albert
Donald Stephens
Managing Director &
Company Secretary
CEO
Pedro Rodriguez
Advisor
Senior Leadership Team
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Michael Schlumpberger EGM Operations

Mike Norris John Claverley Chief Financial Officer General Manager

Gonzalo Mayoral EGM Development

Hayden Locke Head of Corporate & Strategy

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2. Board and Senior Management

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Board and Senior Management experienced in construction and operations

Board of Directors and Senior Management	Board of Directors and Senior Management
Derek Carter – Non Executive Chairman A geologist with over 40 years experience in exploration and development, including nearly 20 years in management of ASX listed exploration companies including acting as Chief Geologist in Spain for the Shell Group and the Managing Director of Minotaur Resources.	Peter Albert – Managing Director & CEO A metallurgist by training, and a Chartered Engineer, he has over 30 years’ experience in project management, construction, operations, stakeholder management and corporate strategy globally. He has held senior leadership roles with a number of large international companies, including most recently CEO of Hong Kong publicly listed companies G-Resources and Jinchuan Group International.
Pauline Carr – Independent Non Executive Director A governance professional with an accounting background and over 25 years` experience in the mining industry. Pauline has held senior positions in Newmont Asia Pacific and Normandy Mining Limited and worked for many years for Exxon Mobil. She holds positions on a number of other Boards and Councils.	Owen Hegarty – Non Executive Director An executive with over 40 years experience in the global mining industry that included 25 years in Rio Tinto where he was the Managing Director for Asia, and founder and 15 years as CEO of Oxiana Ltd. He is a director of various listed and unlisted resources companies and is Executive Chairman of EMR Capital.
Richard Crookes – Non Executive Director A geologist with over 28 years executive experience in the resources and investments industry. He is currently an Investment Director of EMR Capital and was formerly a Director of Macquarie Bank’s Metals Energy Capital Division and was Chief Geologist with Ernest Henry Mining.	Jim Dietz – Independent Non Executive Director A chemical engineer with over 41 years’ experience in the fertiliser, chemical and petroleum industries. Jim spent the last 17 years of his career at PotashCorp, including 11 years as Chief Operating Officer (COO). Prior to this he worked for Standard Oil of Ohio and British Petroleum.
Donald Stephens – Company Secretary A Chartered Accountant and Corporate Advisor with over 25 years’ experience in the mining industry and accounting profession. He is a director and company secretary of multiple ASX listed entities.	Michael Norris – Finance Director A qualified Chartered Accountant with 30 years´experience, gained almost entirely in the mining industry. Prior to joining Highfield, he was Finance Director for London-listed West African gold producer, Avocet Mining and various positions for Anglo American and Rio Tinto.
Michael Schlumpberger – Project Director A qualified Mining Engineer and MBA, with extensive operational mining experience including over 21 years at PotashCorp during which time he had operational responsibility for the expansion and ongoing operations at PotashCorp’s 8Mtpa Lanigan underground potash mine.	Hayden Locke – Head of Corporate and Strategy Over 10 years experience in a variety of fields including investment banking, private equity and natural resources. Most recently as Head of Corporate for ASX listed Papillon Resources, which was acquired by TSX listed B2Gold Corporation in 2014. 5

3. The Muga Potash Mine

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Muga - Highfield’s most advanced, low capex, high margin potash development project

Summary

• Located in Northern Spain, within 150km of key Atlantic Port near San Sebastian (Port of Pasajes)

• Project Optimisation Study completed in November 2015

• Detailed engineering and design underway, long lead items ordered and deposits paid

• Expected to produce 1.08Mtpa of granular K60 MOP per annum at full production, initial mine life of 47 years life

• Staged project capex including contingency:

• Phase 1 – €267 million delivering 540ktpa

• Phase 2 – €145 million delivering an additional 540ktpa

• Substantial mine life upside potential

• All-in-sustaining Cash Cost to Port – €122 / tonne of MOP

• Unlevered, post tax, NPV10 – US$1.46 billion (NPV8 – US$2.04 billion)

• MoUs signed with two Atlantic Coast ports for long term logistics solution

• MOUs signed with three traders for the sale of MOP, discussions underway with fertiliser offtakers

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Domestic Markets in
Spain and France
consume over 1 million
tonnes of MOP per
annum
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Source: ASX Announcement dated 17 November 2015

3. The Muga Potash Mine

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Relatively simple, proven technology with first rate access to end markets

Decline access to shallow mineralisation Simple Mining Underground room and pillar mining Sylvinite ore Simple Processing Simple flotation process flowsheet Direct connection to national electricity grid First Class Infrastructure Close to port, no road or rail upgrades Strong domestic potash consumption in Spain and France Proximity to Local Markets Good access to the large Brazilian and US markets

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3. The Muga Potash Mine

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Low value farm land with natural terrain features allowing low impact development

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3. The Muga Potash Mine

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Sustainable development minimising surficial impact

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3. The Muga Potash Mine

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Restoration plan designed to reinvigorate the project site at end of mine life

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4. Timeline to Production and Key Milestones

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Construction ready program, two years from commencement of construction to production

				Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project	Month of Project
Item Pre-Development Stages				1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24
Detailed Engineering and Design
Long Lead Items Ordered
Electricity Connection
Water
Site Preparation:
Plant Site
Waste Dumps
Brine / Salt Ponds
Underground:
Box Cut
Decline
Drifts and Conveyors
Aboveground:
Storage Buildings
Process Plant
Drying, Compacting and Glazing
Plant Commissioning

First Production

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5. Muga Capital and Operating Costs

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Lowest project capital cost potash project globally on a $ / tonne of production basis

Muga Phase 1 – Project Capital Cost		• Negotiations continue with Acciona for a fixed price lump sum contract for project delivery
Component	Amount (€ millions)	• No major aquifer unit allows simple decline access
Underground Installations	69.0	• Decline access to mineralisation significantly lowers
Above Ground Civil Works	26.8	capital cost relative to most potash peers
Process Plant	33.0	• Clean ore allows flotation processing without
		crystallisation step, flotation process flow sheet is
Storage and Conveyors	19.9	lower cost
Buildings	5.4	• Grid electricity connection lowers capital and
Instrumentation and Control	1.5	operating cost
Plant Equipment	45.6	• No port upgrades, rail spurs or other
Utilities	16.1	infrastructure expenditure
Indirect Costs	33.8	• First class roads and motorways and access
Contingency	15.9	to site
Total incl. Contingency	267.0	• Phase 1 Capital Cost delivers 540Ktpa production
		• Only €145 million capex to double
		13 production

5. Muga Capital and Operating Costs

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Low delivered cost to customer positions Muga to be a high margin potash mine

Muga - Operating Cost
Component	Amount (€ / tonne MOP)	Amount (US$ / tonne MOP)
Mining	55.1	61.2
Processing	45.1	50.1
Transport (FOB Pasajes)	17.4	19.4
Direct Cash Operating Cost	117.6	130.7
SG&A	7.5	8.3
Sustaining Capital	5.0	5.6
Royalties	0.0	0.0
All-in-Sustaining Cash (AISC) Cost (FOB Pasajes)	122.6	136.2
0 50 100 150 200 250 0 10 20 30 40 50 60 70 Cost to fob $/t MOP Capacity (mn t) Cash Cost to FOB Export Port Highfield

• Muga is expected to deliver bottom quartile all-in-sustaining cash (AISC) cost delivered to Europe, Brazil and the USA

• Muga benefits strongly from:

• No brine inflow management costs

• Proximity to domestic customers (< 200km)

• Proximity to export port (< 150km)

– No royalties or government levies

• Low sustaining capital cost

• Low ongoing SG&A cost due to location

Source: Argus FMB Consulting Services Note: Argus cash cost to FOB curve is not on an all-in-sustaining basis 14 and excludes SG&A and sustaining capital costs

6. Stakeholder Engagement

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Highfield is committed to sustainable development, supporting the local community

Safety

• • Developing a strong safety first culture within our work force

  • Focus on preventing harm to both workers and minimising impact on the surrounding environment

• Minimise -

• Environmental Impact

• Core focus on minimising risk and impact on environment surrounding the project area

• ESIA completed in compliance with industry best practice, Spanish legislation and IFC’s Equator Principles

• Implement robust and appropriate ongoing monitoring and response plans

Sustainable Economic - Development

Creating quality employment with a preference for local employees and contractors Become a significant employer in the region

Social Development

Creating an industry for the long term Continue to invest in community initiatives surrounding the project

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6. Stakeholder Engagement

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Highfield is actively participating in the community through its Geoalcali Foundation

Geoalcali Foundation

• Established in September 2014

• Over 70 community projects to date

• Visible statement of Company´s intent to actively support the community

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Seguridad Primero

Compromiso medioamiental

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Crecimiento económico

Desarrollo social

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6. Stakeholder Engagement

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Strong social licence developed through engagement and projects with communities near Muga

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7. Permitting

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Permitting process moving towards conclusion

• Company’s ESIA submitted to central environmental permitting authority (MAGRAMA) – November 2015

Environmental Declaration

• MAGRAMA requested various provincial authorities to provide analysis and commentary on Company’s ESIA – April/May 2016

• All provincial authority reports submitted to MAGRAMA – October 2016

• Company has reviewed reports and considers them positive with no “red flags”

• MAGRAMA is currently reviewing and assimilating the provincial reports with timing on feedback / follow up to be confirmed

• Following the award of the Environmental Declaration (DIA) the Department of Mines, can consider the award of the Mining Concession (CE)

Mining Concession

• The Company continues to remain confident of receiving its DIA and mining concession in the near future

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8. Upside – Other Projects

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Control of basin of projects with shared characteristics of Muga Potash Mine

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8. Upside – Muga Expansion & K62 Project

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Highfield has a number of near term value creation opportunities

SOP Project

K62 Crystallisation Project

• Scoping Study complete for 500ktpa SOP Mannheim facility

• Total capex US$147 million

• Lowest quartile cash cost to customer

• Crystallisation plant to process slimes and tailings from Muga Potash Mine to produce K62 MOP and high purity vacuum salt

• Scoping Study released May 2015

• MOUs signed with acid suppliers, HCl customers and ports

• Initial Capital Cost of US$124 million including contingency

• Good access to US market, strong implied margins to Highfield

• NPV10 of US$222 million (NPV8 – US$285 million)

• Study contemplated production of 135ktpa of K62 MOP and 260ktpa of high purity vacuum salt

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Source: ASX Announcement dated 19 June 2015

9. Value Proposition - Highfield

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Independent verification that Muga Mine would have made Highfield the highest margin producer

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9. Value Proposition – Potash Market

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Many experts believe potash prices have reached the marginal cost of production

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Solid Demand
Fundamentals
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Fundamentals
65 million
tonnes
60 million
tonnes
Producer
Discipline 5.9 million 0.9 million
Returning tonnes tonnes
2015 2016 Closures and 2016 2016/17 Potential
Production Supply Operating Consensus Under
Capability Reductions Capability Demand Supply
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Have we seen the start of a recovery for potash prices?

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Source: Argus FMB, PotashCorp, Company websites and releases

9. Value Proposition - Highfield

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Low capex, low risk, high margin potash development with majority of its funding in place

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Low Capital Cost
Lowest capital cost to
production
Outstanding
High Margin Investment
Bottom quartile delivered
Metrics
cost to customer
Well funded Approx. A$80 million in
Compelling
Investment cash
Value
Lower Technical Muga NPV10 – US$1.46bn
Risk
First world jurisdiction
Lower Risk
Clear path to export
Low Geopolitical markets
Risk
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10. Summary

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• Outstanding portfolio of projects with Muga the flagship

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• Lowest capital cost to production

• Lowest quartile delivered cash cost to customer

• NPV10 – US$1.46 billion (NPV8 over US$2 billion)

• Experienced team of mine builders and operators

• MD Peter Albert has over 30 years’ experience in building and operating mines globally

• EGM Operations, Mike Schlumpberger, was GM of PotashCorp’s largest underground potash mine in Canada

• Well funded

• Approximately A$80 million in the bank

• Project finance syndicate with credit approvals for facility to support construction

Logo of the Company’s Spanish Foundation that is currently delivering several projects with local communities

• Awaiting final permits to commence construction

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REGISTERED OFFICE

169 Fullarton Road Dulwich SA 5065 Australia

HEAD OFFICE

Avenida Carlos III, 13-15, 1B, 31002 Pamplona, Spain T +34 948 050 577 | F +34 948 050 578

www.highfieldresources.com.au info@highfieldresources.com.au

FURTHER INFORMATION

Peter Albert Managing Director T +34 628 590 109 Hayden Locke Corporate Development T +34 609 811 257